The introduction of the new large aircraft, the Airbus A380, will require investments by airports to enable them to handle it. These investments will be in the nature of sunk costs, such as in widening runways. As such they will pose problems for pricing, cost recovery, and investment evaluation. Short-run pricing efficiency involves not imposing any specific charge for the use of the aircraft, which will mean that users will not face the costs they impose. This, however, could create problems in terms of signals for investment. In addition, the ownership/regulatory environment within which most airports operate will further increase the incentives for excessive investment.

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Document Type: Research Article

Publication date: September 1, 2005

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